Court to rule on “methods” patents

Posted Mon, June 1st, 2009 10:03 am by Lyle Denniston

The Supreme Court agreed on Monday to consider writing a new, modern definition of the kinds of inventions that are eligible for patent rights. It accepted for review a test case on when, if ever, an invention that involves a method of doing business can be patented. The decision in the case of Bilski, et al., v. Doll (08-964) will come in the next Term, starting Oct. 5.

The Court asked the U.S. Solicitor General to provide the federal government’s views on when U.S. laws against securities fraud apply to transnational securities dealings — an issue that the Court has never ruled upon, but that has produced a deep division in lower courts. The case is Morrison, et al., v. National Australia Bank, et al. (08-1191). There is no timetable for the government’s response. After those views come in, the Court will then decide, during its next Term, whether to hear and decide the case.

The Court, continuing to work its way toward a summer recess, probably by the end of this month, issued one ruling on the merits, and a second summary decision without briefing or argument.

In the ruling, the Court decided unanimously that the Sixth Circuit Court had improperly “derailed” an Ohio state court’s consideration of a claim by a death row inmate that he is mentally retarded, and thus cannot be executed. The Circuit Court, Justice Ruth Bader Ginsburg wrote in Bobby v. Bies (08-598), was wrong in issuing a habeas ruling that inmate Michael Bies’ retardation had already been established. Bies must pursue that claim in a pending state court case, the Justices concluded.

In an unsigned (“per curiam”) opinion, the Court by a 7-2 vote overturned a $5 million jury verdict in favor of a railroad employee who had work-related brain damage and lung diseases after prolonged exposure to a toxic chemical in the workplace. The Court found that the jury should have been instructed on what the worker must prove to show a genuine fear that he would someday develop cancer. The ruling came in CSX Transportation v. Hensley (08-1034). Justices Ginsburg and John Paul Stevens dissented.

The Bilski patent case that the Court agreed to hear will give the Justices the option of defining the scope of patent law to take account of the impact of the digital age on developing software that controls human activity, such as making business decisions about how to scope with economic risk. The U.S. Solicitor General had urged the Court to bypass the case, but the Justices did not take that advice. The case has generated hot, and even worldwide, controversy since two inventors in 1997 filed an application for a patent.

At issue in Bilski is an attempt by inventors Bernard L. Bilski and Rand A. Warsaw to revive their claim to patent protection for a business methods invention they made — a method of managing risk for a business potentially affected by unpredictable price fluctuations (such as in the purchase of raw materials, or commodities).

Not since 1981 has the Supreme Court undertaken to spell out the kinds of inventions that are eligible for patent rights — that is, the right to produce or use an invented device or process, or to license it to others for royalties. Much has changed since the Court’s decision in Diamond v. Diehr in 1981, not least the digital revolution.

The Bilski case has a modern cast to it, for at least two reasons: first, it involves the concept of digitizing business methods through creation of new computer software, and, second, it involves the rapid growth of information technology in global commerce. The case is expected to draw a larger number of friend-of-court briefs on both sides of the patentability question. The Bilski-Warsaw petition already has attracted a number of amici.

The Supreme Court’s request on Monday for the federal government’s views on the overseas application of U.S. securities fraud laws may have implications for the ongoing global controversy over the Bernard Madoff “Ponzi scheme.” That alleged massive fraud originated in the U.S., but has been “exported” to other countries as well, spurring a number of lawsuits by foreign investors in those jurisdictions.

The particular case involves three Australians who claim they were defrauded by a foreign bank — the National Australia Bank — for activities many of which occurred overseas. The claim is that the investors’ holdings in the bank’s stock were harmed by an alleged scheme to commit fraud in dealing with mortgage-backed securities by accounting misdeeds by a U.S. subsidiary of the Australian bank, HomeSide Lending Inc. of Jacksonville, Fla.

The case turns on how a court is to determine what kind of conduct, and where it occurred, had contributed to a transnational securities transaction.

Upcoming Oral Arguments

3/31Kimble v. Marvel Enterprises, Inc. Whether the Court should overrule Brulotte v. Thys Co., which held that “a patentee’s use of a royalty agreement that projects beyond the expiration date of the patent is unlawful per se”.

4/20Johnson v. United States Whether possession of a short-barreled shotgun is a violent felony, leading to a longer prison term as a career criminal.

4/21McFadden v. United States A federal prosecutor’s duty to prove that a suspect knew that a substance was an illegal substitute for a banned drug.

4/22Horne v. Department of Agriculture The federal government’s duty to pay raisin growers for an order requiring removal of part of a year’s crop from the market to stabilize prices.

On Monday afternoon Justices Anthony Kennedy and Stephen Breyer testified before the House Appropriations Committee. The purpose of the hearing was to discuss the Court’s budget for the next fiscal year and the federal judiciary, but the legislators also took full advantage of the occasion to touch on other topics as well.